Exhaust gas recirculation (EGR) has proven to be beneficial for not only fuel economy improvement but also knock and emissions reduction. Combined with lean burning, it can assist gasoline engines to become cleaner, more efficient and to meet the stringent emissions limit. However, there is a practical limit for EGR percentage in current engines due to many constraints, one of which being the ignition source. The Microwave Discharge Igniter (MDI), which generates, enhances and sustains plasma discharge using microwave (MW) resonance was tested to assess its ability in extending the dilution limit. A combination of high-speed Schlieren imaging and pressure measurements were performed for propane-air mixture combustion inside a constant volume chamber to compare the dilution limits between MDI and conventional spark plug. Carbon dioxide addition was carried out during mixture preparation to simulate the dilution condition of EGR and limit the oxygen fraction. Results indicated that the MDI can successfully outperform the conventional spark plug and have better dilution performance for similar input energy. By increasing the energy delivered to plasma, it is possible to further extend the dilution limit using MDI. The reasons for better performance of MDI were investigated by analyzing the high speed Schlieren movies. The effect of microwave duty ratio during plasma sustainment period was also investigated for optimization.